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When a government entity takes property through eminent domain, the property owner is entitled to receive compensation that is just and fair. But how exactly is just compensation calculated? Learn how the fair market value of a property is used to calculate just compensation and see what type of damages a property owner may be eligible to receive.
What Are the Components of Just Compensation in Eminent Domain Cases?
Just compensation ensures that property owners receive fair payment when their private property is acquired through eminent domain. The primary component of just compensation is the fair market value of the property at the time of the taking. This value reflects what a willing buyer would pay a willing seller for the property under normal market conditions.
When the entire property is taken, the calculation often considers the property’s highest and best use. This concept evaluates the most valuable use of the property, which may differ from its current use. For example, land currently used for residential purposes might have greater value if zoned for commercial development.
In partial takings, where only a portion of the property is acquired, compensation can become more complex. The appraiser will assess the property’s value before the taking and compare it to its value after. The difference between these two figures represents the compensation owed for the loss in property value. Additionally, landowners may be eligible for damages related to the diminished value of the remaining property, such as restricted access or loss of functionality.
Understanding the components of just compensation is crucial for property owners involved in eminent domain cases. At Hansen, Howell, and Wilkie PLLC, we help clients navigate these challenges and pursue fair outcomes for their property rights.
What Does Fair Market Value Mean?
Fair market value is the amount that a property is worth in an open and fair market, where both buyers and sellers have equal bargaining power and are willing participants in the transaction. To determine fair market value, appraisers typically look at the purchase prices of similar properties that have recently been bought and sold on the open market. An appraiser may look at the comparable sales and take into account any improvements or changes made to the subject property, as well as the current market conditions. The appraiser may also consider any special features of the property that could influence the market value, such as location, zoning, and access to utilities.
Market Value Vs. Property Compensation
Market value isn’t necessarily the same as the amount of compensation a property owner may receive under eminent domain. Just compensation is determined by the property’s fair market value as well as several other factors, such as damages to the property or loss of business income.
Are There Any Types of Property Sale That Cannot Be Used to Determine Fair Market Value?
When determining fair market value in eminent domain cases, only certain types of sales can be considered valid for valuation purposes. The key is whether the transaction represents a fair exchange between a willing buyer and a willing seller under normal market conditions. Below are examples of property sales that are generally excluded:
Unclosed Transactions:
Offers to purchase, listing prices, or agreements that have not been finalized cannot typically be used to establish fair market value. These transactions lack the certainty and finalized terms needed for accurate valuation.
Sales to Condemning Authorities:
Transactions involving sales to government agencies or other condemning entities are often considered forced sales. These do not reflect fair market value because the seller was compelled to sell under eminent domain, removing the voluntary nature of the exchange.
Personal and Emotional Factors:
Fair market value does not account for personal considerations such as stress, relocation costs, sentimental attachment, or emotional distress. While these are significant to the property owner, they are typically addressed as separate claims for damages, not as part of the property’s market value.
Understanding these exclusions is vital for private property owners involved in eminent domain cases. At Hansen, Howell, and Wilkie PLLC, we are committed to helping clients protect their rights and achieve fair outcomes during this complex process.
Are Property Owners Eligible to Receive Compensation for Damages?
In an eminent domain condemnation, property owners may also be eligible to receive compensation for damages caused by the project to the remaining portion of their property (called the remainder or residue). Compensation for damages is determined by calculating the difference between the fair market value of the remainder before and after the project. Damages can include a decrease in value due to factors such as noise, vibration, or other adverse effects of the project. Property owners may be eligible for severance damages compensation in addition to receiving just compensation for their condemned property.
Speak With Our Firm Today
If your property is in the process of being condemned by the government, reach out to an eminent domain attorney right away. The attorneys at Hansen, Howell & Wilkie, PLLC, have the knowledge and skills to help you protect your property rights and fight for maximum compensation on your behalf.
Contact our office at 919-256-5266 to learn more.
